Doosan – A new Chaebol is born

It was Tuesday March 17th, 2015 when we had the chance to meet one of Doosan senior manager during our South Korean trip. Thanks to its testimony we have had the chance to discover a typical South Korean Chaebol that has grown and expanded internationally in recent years. Let me tell you a bit more about this company…

Created in 1896, Doosan has first started as a small retail shop in Baeogai. It is now one of the biggest company in the South Korean business landscape, a so-called Chaebol (family controlled conglomerate). Doosan is today active in several different sectors from Construction to Defense, as well as Power, Engines, Engineering, Machineries and many more! Since 20 years, the company has found growth by acquiring local as well as foreign companies and has grown its revenues from $3b in 1998 to $26b in 2011. Currently operating in more than 38 countries and employing no less than 43,000 people, Doosan is organized as follows:

Although divided in three divisions, 90% of Doosan revenues come from ISB, which includes Doosan Heavy Industries & Construction, Doosan Infracore, Doosan Engineering & Construction, Doosan Engine, Doosan DST, Bobcat Company, IMGB, Skoda Power (and a few more). Looking at the revenue streams, it is clear that Doosan has kept its focus on core activities in the heavy industry, while diversifying into banking, private equity, commodities, sports & magazines with its relatively small division CSB. In recent years, Doosan has been implementing its new strategy: the 2G’s Strategy! Strategy for Growth, the 2G’s Strategy focuses on People Growth and Business Growth. Indeed Doosan puts much emphasis (or so it is said) on its people as the company believes they are the core of the business. Without them activities would not run, hence the importance of taking care of them. Great philosophy where it seems some companies are still willing to keep their employees on the long-term whereas the tendency in Europe and North America is the opposite: increase in employees’ turnover, a result of people switching from one job to the other every 2-3 years with most of the time a change in company.

Among dilemmas that every company faces when playing on an international scale (growth, market acquisition, customer loyalty improvement, etc), the Chaebol has been facing a major dilemma regarding management. We said earlier that Doosan had grown using M&A (Mergers & Acquisitions) and particularly by acquiring Bobcat in 2007 for no less than $4,9 billion. This American based company looked like a great opportunity for Doosan to penetrate to compact construction equipment business where it had very weak presence up until now. One of the leader in this field, Bobcat acquisition allowed a quick market penetration and a consolidation of Doosan’s activities. But it was without taking into consideration the cultural shock it created within the company. Indeed, American and Korean culture differ on many points and integrating a westernized located company with a management board and employees is not something to be taken lightly. Indeed while Korean corporate culture mainly rely on top down management, in America it is much more about proactivity! So that to say that problems were meant to arise! The solution found within Doosan has been a division of the world for the activities: East VS West. While the former is being led by a Korean management, the latter has been deployed under bi-cultural management team. This way, the link between the Mother Company and subsidiaries is now possible and activities are running much better than shortly after Bobcat acquisition.

Doosan is now of the path to stabilizing activities and building on its new capabilities. After years of acquisitions, today’s challenges for Doosan include increasing cash, achieving sustainable growth through acquisitions & improving operational excellence!